Brexit: Transition Period

Baroness Hayter of Kentish Town Excerpts

Monday 16th April 2018 Lords Chamber

[Lord Callanan]

We set out in the agreement that we reached with the EU how we see the implementation period working, which is pretty much to maintain the existing arrangements in place to provide certainty for businesses.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I would like to talk about the transition period. We now understand that we are coming out of all the agencies in March, so we will be out of the European Medicines Agency in March. What is the attitude of the pharmaceutical industry to that decision?

[Lord Callanan]

The noble Baroness makes a good point. We are continuing the discussions with the EU to see what the precise formulation of our involvement in the various agencies will be. We are clear that we want to remain involved and participate in the work of those agencies, which are so essential for many businesses in the UK, but we are currently discussing how precisely that will work during the implementation period.

Brexit: British Citizens

Baroness Hayter of Kentish Town Excerpts

Thursday 29th March 2018 Lords Chamber

[Lord Callanan]

I thank my noble friend for his comments, but let us see how Report goes before we get the congratulations in too early. Yes, Emily Thornberry’s comments yesterday were interesting, as were Keir Starmer’s at the weekend when he said:

“I don’t think there is any realistic prospect of”,


Article 50 “being revoked”. On the referendum, he said:

“Having asked the electorate for a view by way of the referendum, we have to respect the result”.


I never thought I would hear myself say it, but on this occasion I agree with the Labour Party.

[Baroness Hayter of Kentish Town (Lab)]

I am glad the Minister agrees with the Labour Party. Will he also agree that the six tests that we have set should be met? This must be a Brexit for jobs, for people, for all regions of the country and for all parts of the country. That is what we want the Government to seek. Will he agree to meet those tests?

[Lord Callanan]

It depends on what the Labour Party’s policy is for this week, but if the six tests are the policy for this week, of course we will try to reach a Brexit deal that works for everyone, is good for jobs, for British industry and for people, and respects the result of the referendum.

Brexit: Immigration

Baroness Hayter of Kentish Town Excerpts

Thursday 29th March 2018 Lords Chamber

[Lord Callanan]

We have been very clear that free movement will end at the end of the implementation period. Having said that, in our negotiations with the EU we are committed to seeing how we can smooth the flow of people in the future. However, we are very clear that one message from the referendum was that we need to take back control of immigration and deliver that for the people.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, first, I hope that this is the last time that I will have to be here before the break, and I wish everyone a happy Easter. The Greek Easter will be a week later—pungent bitter herbs for those who are about to commemorate Passover. I understand that there is now to be a further delay to the immigration Bill. Would it not have been a very good idea if, before fixing the exit date, the Government had decided what sort of role there would be for EU citizens after leaving? Will they come into this country in the same way as Commonwealth citizens or American citizens, or in some other way? We are now facing leaving without any idea of what our future Immigration Rules will be. Is it not time that we moved on that?

[Lord Callanan]

I thank the noble Baroness for her Easter good wishes. I think that I will spend my Easter studying amendments to the withdrawal Bill; nevertheless, I hope that we all get some time off. Yesterday the Home Secretary said that we expect to publish a White Paper on a future immigration system before the end of the year in order for consultations to go forward. Legislation will follow that but we have already provided certainty for what will happen during the implementation period up to the end of 2020.

European Union (Withdrawal) Bill

Baroness Hayter of Kentish Town Excerpts

Committee: 10th sitting (Hansard): House of Lords
Monday 26th March 2018 Lords Chamber

[Lord Elystan-Morgan (CB)]

My Lords, I respectfully agree with the sentiments articulated by the noble Lord. In relation to Wales, a totally new attitude has been taken toward reservations. The noble Lord, Lord Tyler, suggested that reservations were somewhat limited on the whole in devolution legislation. That is not so; in the Wales Act there are 197 separate reservations, believe it or not. Some are massive; some apply to sovereign powers that should belong to the mother Parliament; others are very trivial. For example, dangerous dogs, sharp knives and axes, prostitution and half a dozen similar situations are included. Why they were ever included in that context I know not, but there they are. Therefore, the area that has been reserved regarding Wales is massive and comprehensive.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I rise only to make it clear that the unanimity comes also from the Front Bench. My noble friend Lord Morgan may not be on the Front Bench but on this occasion we are absolutely as one with him.

It would perhaps be helpful if the Minister feeds back what he has heard from the devolved Administrations in his discussions with them on these amendments.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I thank noble Lords who participated in the discussion on these amendments. In opening, let me say that I fully understand the absence of my noble friend Lord Blencathra. I am very grateful for his careful consideration of the Bill and that of the Delegated Powers and Regulatory Reform Committee, which he chairs.

I apologise to the noble Lord, Lord Tyler. I knew that my noble friend Lord Blencathra was not going to be here and I tried in vain to find out who would be his substitute so that I could have had a word with them earlier. However, I am very happy to meet the noble Lord afterwards at any convenient juncture to discuss this. In fact, I had heard at a previous stage that the substitute would be the noble Lord, Lord Thomas of Gresford, so I encourage him to ignore the several messages he has received from me.

I will respond first to the general points made and then pick up some of the specifics. I want to make it clear that the amendment that the Government have tabled to change how the Bill deals with devolved competence would, as part of that change, remove the Order in Council procedure from Clause 11 and Schedule 3. In the light of this, my noble friend’s amendments would no longer be necessary on that specific point. However, I will address the substantive point that my noble friend Lord Blencathra sought to make, and which has been made by the noble Lord, Lord Tyler, in his stead, on the modification of the devolution statutes—namely, the Scotland Act 1998, the Northern Ireland Act 1998 and the Government of Wales Act 2006—by secondary legislation.

I understand the point made by the noble Lord, Lord Tyler: that the Order in Council powers contained in Clause 11 and Schedule 3 are unsatisfactory substitutes of those contained in Section 30 of the Scotland Act and Section 109 of the Government of Wales Act. I accept that there is merit in my noble friend’s argument that there may be a difference in the function of these powers and that we may wish to consider the need for a different procedure. As I said, I am very happy to discuss that point with my noble friend Lord Blencathra, the noble Lord, Lord Tyler, and others.

I do not agree that it necessarily follows that secondary legislation can never be used to modify devolved competence or the devolution statutes more widely, and that this should only ever be achieved through primary legislation. For example, we used the procedure in 2013 to amend the Scotland Act 1998, and we used an order in 2007 to amend the Government of Wales Act 2006. There are previous examples and, more recently, we saw the Treaty of Lisbon (Changes in Terminology) Order made under Section 2(2) of the European Communities Act. It has sometimes been a convenient way to proceed, by consent of the devolved Administrations.

I am grateful to the noble Baroness, Lady Hayter, for raising the point that she did. We have been discussing these issues with the devolved Administrations and continue to do so in a perfectly constructive way. I have to say that there is no agreement yet, but we are looking at how this should be used going forward.

I will pick up some of the particular points made. I appreciate that the noble Lord, Lord Tyler, was making general points, but, as I say, the specific issue mentioned will not arise in the light of the amendments we have put down. However, I appreciate that it was, as he said, the unanimous view of the Delegated Powers and Regulatory Reform Committee. I thank the committee for its third report and constructive and dispassionate work on these issues. I served on that committee for a time and I know it looks at these issues constructively.

--- Later in debate ---

[Lord Wallace of Tankerness]

My Lords, I will pick up what the noble Lord, Lord Kerr of Kinlochard, has just said. The criteria set out in this amendment—and in one tabled by the noble Lord, Lord Griffiths of Burry Port, to which the noble Lord and I both put our names but which was not moved—reflect a set of principles for common UK frameworks agreed at a Joint Ministerial Committee on EU Negotiations last October. They are certainly a basis for moving forward and already have a buy-in from the United Kingdom Government and the devolved Administrations in Scotland and Wales.

When creating United Kingdom frameworks, we do not want to find a situation where, when we come out of the European Union, there is something which impedes a Scottish beef producer freely selling their beef in Wales or a Welsh sheep producer selling lamb in Belfast. These benefits predate our entry into the European Common Market. It is also important to remind ourselves that the restrictions on the Scottish Parliament relate not only to reserved matters or EU law, but to what is in Schedule 4 to the Scotland Act. That specifically constrains the Scottish Parliament from doing anything which modifies Articles IV and VI of the Union with Scotland Act 1706 and the Union with England Act 1707. If one reads these two articles of the Acts of Union, drafted 280 years before the Cockfield report, one finds not a bad model, in the language of its time, for a customs union and a single market which have served us well over three centuries.

I also note that as well as the criteria that have been agreed, the Scottish Government themselves, in their legislative consent memorandum to the Scottish Parliament in September last year, said at paragraph 19:

“The Scottish Government has made clear, repeatedly, its willingness to negotiate UK frameworks in certain areas previously covered by EU law. This could be, for example, to support the functioning of UK markets, or to facilitate the management of common environmental resources”.


Therefore, I believe there is a basis for reaching agreements here, but it is important that these are not imposed.

In giving evidence to the Scottish Affairs Committee in the other place last year, the Secretary of State for Scotland, Mr Mundell, stated at paragraph 21 of that committee’s first report of Session 2017-19:

“The Secretary of State for Scotland agreed that any common frameworks should be agreed with the devolved administrations, stating:


A UK framework is not a framework that the UK Government imposes; it is a framework that is agreed across the United Kingdom”.


It is important that we approach this issue with that in mind. That is why I think the amendment suggested and spoken to by the noble and learned Lord, Lord Mackay, is helpful. Indeed, that Select Committee went on to recommend that:

“Any common framework must require the consent of the governments of Scotland, Wales and Northern Ireland, where relevant”.


It is important to have a dispute resolution mechanism, as referred to by the noble Baroness, Lady Finlay of Llandaff, because there is potential for some disagreement in setting up these frameworks—I hope not as much as is sometimes thought—for which a dispute resolution mechanism is required. One assumes that once these frameworks are established—that goes beyond the ambit of this Bill—they will not be static but will develop. It might be useful at some stage—not in this debate or in this Bill—to get an indication from the United Kingdom Government as to how they see these frameworks working after they have been established. Do they want to see common standards apply across the United Kingdom, but have diversity within that as to how they are implemented in Scotland, Wales and Northern Ireland, or in England through the United Kingdom Parliament? That too will require some form of dispute resolution mechanism. The Select Committee, to which I have referred, recommends that,

“the UK Government and the devolved administrations agree a mechanism by which disputes can be resolved in the event that common frameworks cannot be agreed”.

I think that that is a two-stage process. First, there is the establishment of the common frameworks, where the amendment of the noble and learned Lord, Lord Mackay, is very pertinent, and, as we move forward, there is the issue of how we look at the operation of the common frameworks, which I believe will also need some form of dispute resolution mechanism. However, it is important that we move forward with the common frameworks. The amendment in the name of the noble and learned Lord, Lord Hope of Craighead, certainly reflects agreements that have already been reached between the United Kingdom Government and the devolved Administrations.

[Baroness Hayter of Kentish Town]

My Lords, I wish to add a couple of points. First, are discussions progressing on the possible inclusion in the Bill of a schedule detailing these areas of concern? Secondly, the noble and learned Lord, Lord Wallace of Tankerness, said that a solution should be agreed, not imposed. We should heed those words. I again ask the Minister: as regards reaching agreement on these issues, to what extent does he have in mind involving the legislatures rather than just the devolved Governments?

The Minister has had notice of my next point. I would like to correct something that the noble and learned Lord, Lord Keen, said in the House last week. He said that there were,

“about 153 areas in which, upon our leaving the EU, competences will return and touch upon areas of devolved competence. These are areas that the devolved parliaments and assemblies previously had no engagement with because they lay in Brussels”.—[Official Report, 21/3/18; col. 334.]

I have since written to him because that it not completely the case. As it works, the memorandum of understanding provides that, in matters of devolved competence, the UK Government consult the devolved Administrations to agree a common UK position on matters before the Council of Ministers, and then defend that position in the Council. Indeed, as we just heard, occasionally devolved Ministers will do that and represent the UK. However, whether it is a UK Minister or a devolved Minister there, they speak in this case for an agreed UK position, not just a UK government position. It may therefore be helpful if the Minister confirms that understanding, which is undoubtedly how the devolved Governments see it. What has been said is right: the spirit to reach accord is there. However, perhaps for clarity, it would be good if that could be confirmed.

[The Parliamentary Under-Secretary of State, Northern Ireland Office and Scotland Office (Lord Duncan of Springbank) (Con)]

Perhaps noble Lords will forgive me for a moment or two while I stretch my back, which is just a little bit tight. Now I am fighting fit. I point out to the noble Lord, Lord Adonis, that it is because I am carrying the heavy weight of Brexit on my shoulders.

I thank the noble and learned Lord, Lord Hope, for bringing forward this amendment, and all noble Lords who have introduced some interesting debate into the discussions today. It will be useful for us to begin by looking at the deep-dive process itself, whereby the devolved Administrations together with the UK Government have pored over the various 150 or so areas to which my noble and learned friend Lord Keen referred. They have been guided, as the noble and learned Lord, Lord Wallace, noted, by a suite of agreed principles, which indeed from time to time make reference to such concepts as the UK market itself, trade and various other obligations. I understand that each of your Lordships should have had in their postbox or email in-tray a series of emails from my noble friend Lord Bourne which set out the principles themselves and the areas in which they intersect with the policy matters.

It may be useful if I give a flavour of that. It struck me, as I was discussing with various officials in my department and others, that we have perhaps not done that before to give your Lordships a sense of the sheer scale and magnitude of the engagement thus far undertaken. There is a certain sense sometimes that we are quite dismissive of the devolved Administrations, when nothing could be further from the truth. To give your Lordships just a flavour of that, in the area of fisheries there have been six full days of discussions between the devolved Administrations and the UK Government—17, 18, 23 and 24 January, and 6 and 7 February. On environmental quality, to take another example, there was a whole-day discussion on ozone-depleting substances and fluorine gases on 31 January, and two full days at the end of January were spent examining chemicals and pesticides. It is useful to recognise that this approach is unprecedented. Its purpose is, again, one of respect. I can see that the noble and learned Lord, Lord Wallace, is ready to jump up. He is welcome to do so—it will give me a chance to sit down.

--- Later in debate ---

Moved by

[Baroness Hayter of Kentish Town]

334: Clause 14, page 10, line 40, leave out from “means” to end of line 41 and insert “such day as a Minister of the Crown may by regulations appoint (and see subsection (2));”

[Baroness Hayter of Kentish Town]

My Lords, it is worth the wait. We need to be clear that these amendments—which return to the Bill its original flexibility over exit day—are not about overturning the decision to leave. They are about removing the straitjacket the Government inserted at the behest of some ardent Brexiteers more anxious to earn their spurs than help the Government in their delicate negotiations. Importantly, the amendments enable the Bill to fulfil the task set for it: to provide a functioning statute book and legal certainty as we withdraw from the EU.

A fixed, immutable date undermines this, which even the Government acknowledge as the Bill contains a get-out in Clause 14(4)(a). The two drawbacks of the fixed date are: first, it undermines the transition period, which is rather vital for our departure; and secondly, it undermines the Government’s negotiating strength. Indeed, it appears to make it illegal, without the use of Clause 14(4) for the UK to extend the Article 50 negotiations period by even a single minute—even if the EU 27 unanimously agreed to do so, and even if it were in our country’s best interests.

With regard to the transition, assuming it will be on current terms, the ECJ would continue to have some hold under those. Therefore, triggering Clause 6(1) to end its jurisdiction on 28 March next year is a nonsense. This needs to be delayed until the end, not the beginning of the transition phase, or, in the case of EU citizens, whom we have promised can access it for eight years, a later date, as may also be needed for our continued participation in Euratom or other agencies.

Turning to the negotiations, as our EU Committee says:

“The rigidity of the Article deadline of 29 March 2019 makes a no deal outcome more likely. For the Government to compound the rigidity of Article 50 by enshrining the same deadline in domestic law would not be in the national interest”.

[Lord Adonis]

My Lords, does my noble friend not agree that it is a question not just of rigidity but of parliamentary sovereignty that Parliament should not agree the date of withdrawal until we see the withdrawal treaty? The flexibility to which she refers in Clause 14(4) is flexibility only at the behest of the Government because they have to move an amendment to the date, whereas it should be Parliament in the driving seat. Parliament should not agree a Brexit date until we see and have approved the withdrawal treaty.

[Baroness Hayter of Kentish Town]

I think that that is what the amendments seek to achieve and, as this House has said again and again, the whole idea was meant to be to bring back decision-making to Parliament.

[Viscount Hailsham (Con)]

The noble Lord, Lord Adonis, is right about this, because the noble Baroness’s amendment would give power to Ministers by regulation to extend or vary the exit date. What the noble Lord, Lord Adonis, is saying, and what I must say I agree with, is that the power should be in the hands of Parliament and that Back Benchers should have the opportunity to trigger the process.

[Baroness Hayter of Kentish Town]

There is a series of amendments in the group, and I hope that when we get to Report we will have one that does exactly what is clearly felt will be needed. The importance of our amendment is to get rid of this absolute fixed date that is there at the moment—and not in the original Bill. It was introduced in one of the few amendments made in the Commons, not for the national interest but for a slightly more partisan reason.

Article 50 provides:

“The Treaties shall cease to apply … from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification”—


unless, of course, the 27 agree to extend the period. Thus the UK would not automatically leave after two years if, for example, the final deal had not yet come into force.

It could be that that itself sets a later date; it could be because the European Parliament had vetoed the deal in January. What would happen in that eventuality? I think it unlikely, but the Government always tell us that we must be prepared for any eventuality, and we should be prepared for that, given the red lines that the European Parliament has been setting down. Guy Verhofstadt told Andrew Marr on television that it meant that, if it did veto the deal, we would leave with no deal—in other words, as we have all said a number of times, trading on WTO terms, with no transition and no safeguards for citizens.

I doubt very much that, should the European Parliament decide that it did not want to agree with the deal, the Governments of the 27, let alone the Government of the 28th, would simply settle for that and say, “We give in—come out on WTO terms, with no concern for EU citizens”. My guess is that there would be rapid and rather complicated negotiations, which is particularly important given that in January next year we know jolly well that when it comes to our customs at Dover, our procedures for registering EU nationals, new VAT forms, agreements on aviation and the export of live animals, and checks on foodstuffs and all manufactured goods, none will be ready by the time of March next year—let alone the situation in Northern Ireland being resolved.

So undoubtedly at that stage, if the European Parliament did vote it down, we would definitely need a period of breathing and talk to get things back on track. If just another week or two would make a difference, surely that should be possible without having to live with the date written into the Act. What could also happen, even without the European Parliament, is that discussions could be going on and agreement could be very close—just days away—and we surely would not want the Act to stop those discussions taking place. Setting that date in stone must be unhelpful to say the least.

The Government think that they can agree the substance of our future partnership with the EU before October this year, but the report from the other House from the exit committee said that,

“it is difficult to see how it will be possible to negotiate a full, bespoke trade and market access agreement, along with … other agreements, including on foreign affairs and defence”,

by October. It suggested that,

“the Government should seek a limited extension to the Article 50 time to ensure that a Political Declaration on the Future Partnership that is sufficiently detailed and comprehensive can be concluded”,

before we enter the transition period. The same report states:

“If a 21-month transition … period is insufficient time to conclude and ratify the treaties/agreements that will establish the Future Partnership or to implement the … technical and administrative measures along with any … infrastructure at the UK border, the only prudent action would be for the Government to seek a limited prolongation to avoid unnecessary disruption”,


and that the withdrawal agreement should therefore,

“allow for the extension of the transition … period … with the approval of Parliament”.

We can do that only if the date is in our hands and not fixed in the Bill.

The noble Lord, Lord Kerr, who is not in his place, has said that saddling yourself with deadlines is crazy. Had he been here, I would have said that it was not as crazy as writing Article 50 itself—but, as he is not here, I clearly would not say that. The date was put in the Bill to satisfy some Back Benchers who had no involvement with these detailed talks or with the task of implementing the final deal. So let us get it out of the Bill now, untie the Government’s hands and give them a better chance of negotiating a satisfactory way of extraditing ourselves from what is otherwise, I fear, a looming nightmare. I beg to move.

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[Baroness Goldie]

It is a statement of very healthy and good intention. Nothing is agreed until everything is agreed, but it is certainly a signpost as to where we hope to go.

[Baroness Hayter of Kentish Town]

My Lords, one of the questions asked earlier was: what would happen if the European Parliament refused to give its consent? I have a note here from the European Parliament—it advises me that it is not legal advice and is not binding—which certainly says:

“if Parliament”—

that is, the European Parliament—

“refused to give its consent to a draft agreement negotiated by the European Commission, the Council would not be able to conclude the agreement with the withdrawing state”.

That is quite a serious thing to be reminded of.

Someone said earlier that there have been strong views across the Committee on this issue. As the noble Viscount, Lord Hailsham, said, it would be a grave mistake to put the date in statute. However, I disagree with him that the purpose of the amendment—certainly from our point of view—is to halt or up-end everything that is going on. Its purpose is to help the Government to get a better deal. The noble Duke, the Duke of Wellington, put it very pragmatically: he said that we may not be ready for this yet. He also said that we might not yet have got through what I call the “Withdrawal (No. 2) Bill”. However, we have not yet had the immigration Bill, the fishing Bill, the agricultural Bill, the customs Bill or the trade Bill—and there may be a VAT Bill as well. We may find ourselves in a position where we are not ready as a Parliament by the date written into the Bill. That is not a sensible way forward.

The noble Lord, Lord Wallace, said that we should not leave until a worthwhile arrangement has been agreed. This is all about giving us time to do that—and that is certainly what we have been looking to do.

[Lord Wallace of Saltaire]

I reinforce what the noble Baroness has said. We may well face a legislative logjam in both Houses in the autumn of this year. Given the number of Bills that are waiting to come into this House and the possible complexity of an implementation Bill, one of the problems we may face is a simple lack of parliamentary time. Perhaps the Leader of the House might, at some point in the near future, give a preliminary statement on how she thinks we will manage the number of Bills on which we still have to provide scrutiny.

[Baroness Hayter of Kentish Town]

I am grateful to the noble Lord. I am not sure whether the back of the noble Lord, Lord Duncan, or my voice will give up first if we have to deal with all those Bills and we are here all night. We will take money on that one, I think—but there is a real problem there.

The noble Lord, Lord Tugendhat, who I think knows more about negotiating than some people, said that we need to be able to secure the best deal we possibly can and that putting a gun at one’s head puts us at a disadvantage. I am sure no one wants to do that. Others used different language. The noble Lord, Lord Bowness, said that we must remove this self-imposed fetter and that if we can get the date off the Bill the Government will have the flexibility that they say they want.

I wish to make two other points. First, on the issue raised by the noble Lord, Lord Lamont, that we should not worry about this because Ministers could change the date if it proved necessary, at that stage it would be obvious all round Europe that we had had to do it, which does not look like strengthening our hand. Technically, of course, he is correct, but I am not sure it would be the best way forward in PR terms.

The Minister said that fixing the date provides elasticity in negotiations. I do not understand how that would work. To fix a date would take elasticity away. I am also not persuaded by her view that it could not be put into the second Bill, as the noble Lord, Lord Hannay, said. The words “exit day” could be in this Bill, but the specific date could be put in once we know what the withdrawal deal is. We will also know how many hurdles we have to get over and how much extra legislation we might need. I do not think that I am the only one who is not persuaded but, for the moment, I beg leave to withdraw the amendment.

Amendment 334 withdrawn.

European Union (Withdrawal) Bill

Baroness Hayter of Kentish Town Excerpts

Committee: 10th sitting (Hansard - continued): House of Lords
Monday 26th March 2018 Lords Chamber

[Lord Hannay of Chiswick (CB)]

My Lords, I am in favour of the amendment. I shall also add a bit of history that has not been mentioned so far. This time last year we were considering the Article 50 triggering Bill. An amendment was moved by a number of us that was designed both to produce a meaningful process for the end of the negotiations and to include within it the circumstances in which there was no deal. That amendment was passed by a very large majority in this House. It was sent to the other place where it was rejected in a pretty perfunctory way by, of course, the Parliament that was sitting before the general election, and in which the Conservative Party had an overall majority. So it is no good saying the Government are not opposed to a parliamentary statutory decision-making process if there is no deal. They are opposed to it; they opposed it only a year ago. So if this amendment is being brought forward now, it is because the Government have form on this matter.

I would like the Government to recognise that, having lost the vote on the meaningful process in the other place to Mr Dominic Grieve’s excellent amendment, it is more sensible to accept the statutory process for dealing with any outcome to the negotiations, whether that be a deal or no deal or whether it is the case, as I rather suspect now, that the Government have stood their mantra on its head and are now saying a bad deal is better than no deal. But whichever way we look at it, let us be quite sure that Parliament has its say. That is why I support the amendment.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I think the noble Lord, Lord Jay, was a little modest, because it was he who was chairing the European Union Committee at the time when it produced its excellent analysis of what it would mean for there to be no deal and for us to leave on WTO terms. We would have to rapidly set up customs posts around our market. Indeed, as he said, it would also mean no protection or continuation of residence, work or health rights for UK citizens living in the EU or, indeed, for EU citizens resident here. In the latter case, of course, we could pass domestic legislation to safeguard their position but we could not do the same to help UK nationals abroad because no deal would also mean no transition period.

I am sure that for business, as the noble Baroness, Lady Wheatcroft, has just spelled out, that would be a catastrophic outcome. It would mean that in addition to what it would mean for their order books—a rush to set up customs, VAT and all the other stuff that goes with that—I maintain that it would entail a jolt to our economy that would make 2008 look like a kiddies’ party. So a decision to depart from the EU in those circumstances is one to be taken by Parliament, not by the Prime Minister nor even by her Cabinet. The amendment is aimed to ensure that any such decision—coming out without a deal—would be made by Parliament, and bring the no deal scenario within the ambit of the amended Clause 9(1).

We accept that the Government are working very hard to ensure that we do not depart without a deal, and I trust that in those circumstances, they will accept the amendment.

[Viscount Waverley (CB)]

Does the noble Baroness share a concern regarding UK citizens on the continent? She mentions transition. Does she recognise that there may be a problem for Parliament? The Dutch Government have appealed against a ruling by a Dutch court on 7 February to refer a case regarding a UK citizen to the ECJ. The ECJ agreed to take the case, the Dutch Government then appealed and the ECJ is waiting for confirmation whether it will be put back to them. The problem is that if the ECJ takes its fast-track route on adjudication, it will be a four-month process; if it takes the normal time for the ECJ to consider the issue, it will be 15 months, which potentially plays havoc with the issue of UK and EU citizens and their acquired rights within the European Union. Does she recognise that problem?

[Baroness Hayter of Kentish Town]

My Lords, I absolutely recognise that. There are a number of issues which we hope will be part of the agreement. In business, there are what are called goods already on the market, which I believe the transition agreement will cover. There is the arrest warrant. A number of countries forbid any of their nationals being extradited to a non-EU member state, so we could find that if someone who commits murder here hops off to a member state, unless we have this all agreed in the transition deal, they would be free. I understand that the negotiations will say that where a case has started on its track towards the ECJ, let it finish.

There is a raft of things where, if we come out with a bump in the night, and wake up on 30 March with no deal, it will not just be a fall from the bed, it will be a substantial disadvantage. That is why I am confident that we will have a deal, but therefore I am confident that the Minister will accept the amendment.

[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords, I thank the noble Baroness for her contribution.

I have presumed for the purposes of this response that the amendments tabled by the noble Lord, Lord Jay, are intended to ensure that a statute, specifically that provided for in Clause 9(1), is required to approve a situation in which the UK fails to negotiate a deal with the EU.

With the greatest respect, the amendments do not achieve the desired outcome. The statute specified in Clause 9(1) is intrinsically linked to the exercise of the Clause 9 power, which is itself dependent on the existence of a withdrawal agreement. Therefore, in a no-deal scenario, the Clause 9 power and all provisions within it would be unavailable, because there would be no withdrawal agreement.

The amendments would also leave other areas of the Bill inoperable. For example, Clause 7(7)(d) sets out that the power cannot be used to implement the withdrawal agreement. Changing the definition of withdrawal agreement to include the absence of an agreement would therefore leave us unable to use Clause 7 in a no-deal scenario. Vital corrections could not be made in that case and we would be left with many inoperabilities on our statute book.

Of course, I remind the House that, as the noble Baroness, Lady Hayter, and others have said, we are confident that the UK and EU can reach a positive deal on our future partnership—

[Baroness Hayter of Kentish Town]

If the Minister is saying that the amendment does not technically achieve what they want, if we can word it in a way that they want, will the Government then accept it?

[Lord Callanan]

I cannot give the noble Baroness that commitment. I am explaining the amendment and will come to the other implications in a second.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

Article 50 also says that there will be a withdrawal deal which will include the framework for our future arrangements. Article 50, which we triggered, does not say that we are giving notice that we are leaving and that we are leaving without a deal.

[Lord Callanan]

We are giving notice of our withdrawal. The title was in the Bill that we passed to trigger it. Keir Starmer also said:

“Having asked the electorate for a view by way of the referendum, we have to respect the result”.


I agree with him.

I say again only to remind noble Lords so that they can understand my point of view that there has been a legitimate process, marked at intervals by the consent of both Parliament and the electorate. As I said in an earlier debate, amendments that could be perceived as a means to delay or disregard the referendum result carry with them their own risks—people’s faith in their democracy and its institutions. With that in mind, I do not think that it would be right to add an express mechanism within this Bill which might prevent the referendum result being acted upon.

The Prime Minister has been very clear: we are leaving the EU at the end of March 2019. That is not a question of domestic legislation; it is now a question of the EU treaties. While the detail of our future relationship with the EU has yet to be negotiated, I believe that remaining in the EU is the only outcome which cannot be reconciled with the decision taken in the referendum. I do not think that it would be in the interests of either the EU or the UK to open the door to an ever-continuing negotiation process with no certainty that the UK will ever reach a new, settled relationship with the EU. I was going to finish there but I see that the noble Baroness, Lady Ludford, is itching to ask a question.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I shall add a very quick word because so much has already been said. There is an irony in Schedule 4 which may interest the Committee: namely that the power to provide for fees and charges has been handed to Ministers by means of either secondary or tertiary regulation, depending on which part of this measure you are looking at. Paragraph 3 of Schedule 4 states:

“A Minister of the Crown may only make regulations under paragraph 1 with the consent of the Treasury”.


The irony of that is, frankly, extraordinary because it shows where the Government intend the power of the land to lie. We have always suspected that the Treasury is handed some of the greatest powers that are denied to Parliament. If it is considered fit for the Treasury to be able to intervene in fees and charges, then surely it is Parliament’s right to be able to intervene, scrutinise and monitor those fees and charges.

[Baroness Hayter of Kentish Town]

My Lords, I do not think that the noble Lord, Lord Tyler, was threatening to cut the right reverend Prelate’s head off because of this. However, what may have been a threat to the Minister was to me a great delight: the promise of the noble and learned Lord, Lord Judge, that he will do this with knobs on when we come back on Report. I look forward to that.

European Union (Withdrawal) Bill

Baroness Hayter of Kentish Town Excerpts

Monday 19th March 2018 Lords Chamber

Moved by

[Baroness Hayter of Kentish Town]

220: After Clause 9, insert the following new Clause—
“Maintenance of rights in the area of insolvency and restructuring law
(1) Within the period of six months of the passing of this Act, a Minister of the Crown must publish a report outlining the extent to which the benefits afforded by EU insolvency and restructuring law will continue to exist in domestic law after exit day.(2) The report provided for under subsection (1) must include—(a) the steps, if any, taken by Ministers of the Crown to negotiate the continuation of reciprocal arrangements between the United Kingdom and member States in the field of insolvency and restructuring law;(b) the nature and duration of these reciprocal arrangements, if such arrangements have been negotiated; and(c) a declaration from the Minister of the Crown outlining whether, in their view, the UK’s insolvency and restructuring framework has been weakened.(3) The Minister of the Crown must lay the report before both Houses of Parliament.”

[Baroness Hayter of Kentish Town (Lab)]

My Lords, Amendment 220 seeks to draw the Minister’s attention to what we risk losing if the Government fail to negotiate the reciprocal arrangements we currently have in place by virtue of the EU insolvency regulation and the recast Brussels regulation. They provide a speedy and efficient procedure that determines which member state has jurisdiction to open insolvency proceedings as well as ensuring appropriate recognition of proceedings within the Union. Of course, I am referring to our long-term relationship with the EU, not just the transition period. However, I welcome today’s progress in that, in particular the realistic replacement at last of implementation with transition. I am also grateful for article, clause or paragraph 63 in the report released today—I do not yet know which it is—because it provides for the regulations to continue to apply to insolvency proceedings where these commence before the end of the transition period, but that is not enough. We are looking to the future.

The current rules allow for judgments made in the UK to be enforced across other member states. This recognition, whether of appointments or judgments, is key to investors, pensioners, employees, consumers, creditors and businesses. Without the rules, a liquidator or receiver here could lose the ability to freeze and ultimately return to the UK assets that have been squirrelled away across the EU but which rightfully belong to the bankrupt firm’s creditors, be they the staff, consumers who have paid for yet undelivered goods, investors, a pension scheme, landlords or even our blessed HMRC.

The UK has a renowned insolvency regime with one of the highest rates of return to creditors in the world. It gives confidence to investors and traders that their money will not disappear offshore because it enables a receiver to rapidly get hold of that Lamborghini, hidden away in an Italian garage, houses in sunny European climes, bank accounts in Frankfurt or even paintings in Paris, if they are rightly due to creditors here.

There are many examples; I will not go into detail. The purpose of the amendment is to ensure that the Government prioritise this in negotiating our long-term relationship with the EU. The Minister is well aware of my concerns; I set them out last year in writing to the then Minister, the noble Baroness, Lady Anelay. She replied to me on 26 October last year, offering a meeting with the BEIS Minister, Margot James. However, I got a letter from Margot James on 9 January saying that she could not meet me, but Insolvency Service officials could. The problem is, I know that various bodies, such as R3 or the City of London Law Society, who feel that the Government are not taking this seriously enough, have met with the IS and feel that they are not getting traction in the Brexit negotiations. Hence, I would argue the need for a political meeting.

My ask today is a very easy one: will the Government agree to meet me and representatives from the field—perhaps the noble Baroness, Lady Burt, as well—so that we do not have to bring this back on Report but can make progress? I beg to move.

[Baroness Burt of Solihull (LD)]

My Lords, I support the amendment of the noble Baroness, Lady Hayter, from these Benches. I would very much appreciate it if such a meeting could be arranged; I would love to be included.

I want to emphasise the importance of the UK’s insolvency framework to British trade and investment, especially where cross-border insolvencies between the UK and EU are concerned. We need to ensure that the benefits of our existing arrangements can continue, post Brexit, and we need an agreement in place before we exit the EU. We have a strong insolvency framework in the UK, as the noble Baroness, Lady Hayter, mentioned, and some good reforms to corporate insolvency in the pipeline. They would make our rules fit for purpose for both domestic and international markets, as well as underpin the UK’s attractiveness as a place to do business by supporting trade, investment, lending, productivity and entrepreneurship.

Brexit risks creating barriers to resolving cross-border insolvencies between the UK and the EU. We cannot allow that to happen. We need to ensure automatic reciprocal recognition for insolvency judgments and appointments, post Brexit. Unfortunately, we have slipped down the World Bank rankings in resolving insolvency from 13th to 14th; frankly, now is the worst time to be heading in the wrong direction. Life will be tough enough, post Brexit, so let us not risk losing out on the international investment our robust insolvency framework currently attracts. The amendment’s reporting requirements would ensure that no one is allowed to take their eye off the ball.

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[Baroness Hayter of Kentish Town]

My Lords, I do not think that I have ever called the noble and learned Lord “not the appropriate individual”. Actually, that was a very appropriate and helpful response. I thank the noble Baronesses, Lady Kramer and Lady Burt, for their support. The Minister’s emphasis on it being in everyone’s interest that co-operation be maintained is the right way forward. Despite his warm words, a meeting with the relevant sponsoring department, BEIS, would nevertheless be of use. If he can set that up, I am more than content to withdraw the amendment.

Amendment 220 withdrawn.

--- Later in debate ---

[Baroness Altmann (Con)]

My Lords—

[Baroness Hayter of Kentish Town]

My Lords, I think the House wants the Minister to reply, so I was thinking that we are probably ready to end this debate.

I have just heard the first case against referendums, which is that a referendum made my country of Wales dry—and that argument was in support of them. It was certainly dry on a Sunday when I was growing up; and this is the ex-director of Alcohol Concern confessing this.

We have considerable sympathy with one part of these amendments: that the Government cannot be allowed to mark their own homework regarding the outcome of the withdrawal negotiations, be that on Gibraltar, which is mentioned in one of them, our future relations with the EU or the withdrawal deal itself. We discussed last week, as a number of noble Lords have said, the need for a meaningful vote by Parliament on the deal and indeed on what should happen if the deal fails to win approval by the British Parliament. We also considered then the desire of some for a future referendum on the terms of the deal.

As the Committee knows, and as the noble Lords, Lord Wigley and Lord Newby, have said, we see it as essential that there is a proper, meaningful vote on the terms of our withdrawal. We trust that the amendment we will table on Report will find favour in this House and later, we hope, at the other end. As to what should happen if that deal is rejected, surely that must be decided at the time, in the full knowledge of the situation, by the House of Commons. It could be, as in a later amendment in the name of my noble friend Lord Campbell-Savours, by extending the Article 50 period. It might be by revoking the Article 50 notification. It could indeed be by a referendum, though perhaps the wording would be a matter for then, rather than by amendment today. But the first judgment on the terms must surely be for this sovereign Parliament and, if it says no, it must then be Parliament that takes responsibility for what should be the next step. That means nothing is ruled out, which therefore means nothing is set in stone at this moment.

[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords, this has again been an excellent debate and let me say at the outset that I note that support for the amendments comes from noble Lords on all sides of the House. I am not trying to imply that this is a partisan issue, but it is one of principle. I hope that the noble Lord, Lord Butler, the noble Baroness, Lady Wheatcroft, and the noble Lords, Lord Newby, Lord Wigley and Lord Foulkes, who have tabled Amendments 226, 227BH and 357, will believe me when I say that I respect their positions. But this debate has been held many times before, and I therefore hope that noble Lords will forgive me if my argument sounds familiar. The referendum question, agreed by Parliament and presented to the people, was whether we wished to leave or remain in the European Union. Parliament attached no conditions or caveats to that vote.

It was clear in the campaign that a leave vote could lead to a range of outcomes and that not all of us advocating leave agreed about the way to do so. People knew this at the time, it was extensively debated and, in the biggest democratic mandate for a course of action ever directed at any UK Government, voters instructed the Government to leave the European Union.

--- Later in debate ---

[Lord Callanan]

I am not an expert on the proceedings of the other place—I have never been a Member of the House of Commons—but of course the Government will listen to decisions by the House of Commons.

[Baroness Hayter of Kentish Town]

My Lords, this is a crucial moment. The whole issue here is whether it is a mere Motion or whether there is any legislative oomph—sorry, Hansard—behind the vote that Parliament is to have. Am I absolutely correct that the Minister has just said that even if it is a mere Motion, which is what the Government have offered so far, if the deal was rejected they would still take us out of the European Union at the cliff edge, without a deal?

European Union (Withdrawal) Bill

Baroness Hayter of Kentish Town Excerpts

Committee: 7th sitting (Hansard): House of Lords
Wednesday 14th March 2018 Lords Chamber

[Lord Inglewood]

Not immediately.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, as my noble friend Lord Monks said, we in Parliament appear at the moment to be mere spectators, highly dependent on the Government to negotiate on our behalf—indeed, on behalf of future generations—an agreement with the EU as to how we withdraw from nearly half a century of membership and, more seriously, how we work with and alongside the EU in the decades to come: the canvas, or the mandate, in the words of my noble friend Lord Lea.

It is to this latter task that Amendment 144 and its amendments draw our attention. At the moment, the Government are telling us nothing as to the shape of the agreement they wish to reach. “Deep”? “Bespoke”? Those words tell us nothing. What does it mean in regard to family law; our highly profitable creative industries; the protection of consumers, especially in food safety or transport—those trains, planes and ships that carry people and goods from here to there every hour of the day? How does it affect our artistic, sporting and other professionals, who are currently able to work across the EU, representing British companies or citizens, competing, performing or conducting architectural, veterinary or scientific work across that enormous market, or undertaking accounting or auditing work for multinationals? Indeed, a whole range of jobs are currently undertaken day by day by virtue of the IP agreements, broadcasting licensing or the mutual recognition of qualifications, which my noble friend Lord Brooke set out so clearly. Negotiations are needed on those areas.

--- Later in debate ---

Moved by

[Baroness Hayter of Kentish Town]

150: Clause 9, page 7, line 9, at end insert—
“( ) The statute provided for by subsection (1) must include the terms of the withdrawal agreement and make provision for any transitional arrangements which have been negotiated within or alongside the withdrawal agreement.( ) In addition to the statute provided for by subsection (1), the Minister of the Crown must, as a further precondition of making regulations under subsection (1), seek interim approval for the withdrawal agreement by means of motions in both Houses of Parliament, with such motions to be voted on, so far as practicable, before the European Parliament votes on the withdrawal agreement.”

--- Later in debate ---

[Baroness Hayter of Kentish Town]

My Lords, I move Amendment 150, which also appears in the names of the noble Lords, Lord Wallace of Saltaire, Lord Hannay, and Lord Patten, and shall speak more broadly about the objective which, in the mix, these various amendments seek to achieve.

Amendment 150 is perhaps the most modest in the group. It would put into statute the Prime Minister’s promise that the withdrawal agreement would be voted on in both Houses, before a similar—albeit more serious—vote in the European Parliament. Why “more serious”? It is because the European Parliament has to agree the deal or it can go no further. MEPs have a veto, whereas a mere Motion in either or both Houses this side of the water would have no statutory force.

In theory—in law, if not in politics—either or both Houses could say “nay” and the Prime Minister could still say “yea” and sign up. Or the Prime Minister could even, for whatever reason, fail to table a Motion in either or both Houses. We should at the very least write this into law. But the truth is that we must go further than this, along the lines suggested in other amendments, such as that in the name of my noble friend Lord Liddle.

Our amendments cover three specific areas: first, approval by Parliament of the draft withdrawal Bill, prior to the European Parliament vote, plus a procedure for the Commons deciding what to do should our Parliament decline to approve; secondly, approval by Parliament of the final agreement, including the framework for our future relationship and the transition arrangements, plus a procedure for the Commons to decide what to do if Parliament declines approval; and finally, preventing the Government walking away from the talks with no deal without the consent of Parliament and enabling the Commons to decide what should happen if MPs disagree with the Government.

In case anyone thinks that the no-deal scenario has gone away, just last week the Foreign Secretary was still saying that leaving without a deal holds no terrors and that the UK would do very well on World Trade Organisation terms, despite everything we hear from manufacturers and exporters about duties and red tape, the possibility of border posts in Ireland, and of Calais facing 30-mile tailbacks with potential food shortages if we end up with mandatory customs and sanitary checks at the French ferry terminal. Parliament must keep the Government’s feet to the fire and ensure more sensible judgments than Mr Johnson’s guide to negotiations.

It is not just this side of the Committee, nor the various noble Lords who have put their names to the amendments in this group, who want the outcome of the Government’s negotiations to be put to Parliament for endorsement. John Major, who knows a thing or two about negotiating treaties as well as about Parliament, has said that there,

“must be a decisive vote, in which Parliament can accept or reject the final outcome or send the negotiators back to seek improvements, or order a referendum … That is what parliamentary sovereignty means ... No one can truly know what ‘the will of the people’ may then be. So, let parliament decide”.

I might not quite share his view about a referendum, but I do share his view that it is for Parliament, not the Government, to decide on the outcome of the negotiations. That is what the sovereignty of Parliament is all about and it is vital on this issue because of its long-term implications. We need to ensure that the Government, at every stage of the way, remain very aware that it is not just the divided views in the Cabinet that must be satisfied, but Parliament on behalf of the people.

During the Article 50 Bill, this House voted overwhelmingly for a “meaningful vote” for Parliament. We will ensure that this demand is put into this Bill. I hope the Minister will give an undertaking that the Government will accept an amendment on Report to make that demand a reality. I beg to move.

[Lord Wallace of Saltaire]

My Lords, my name is to this amendment. I think most of us would agree that Clause 9 as it stands is simply not fit for purpose or constitutionally acceptable. It leaves it to Ministers to decide and implement whatever our divided and chaotic Government have by then asked for and managed to negotiate with the rest of the EU. I find it astonishing that the Government have failed to set out their negotiating preferences 18 months after the referendum and 12 months before the proposed exit day.

In six days in Committee we have had a process of discovery about the number of issues on which the Government do not have a coherent view. The noble Lord, Lord Callanan, has argued that the Government are protecting their negotiating position. It seems to me they are rather protecting their nakedness on much of it as they do not have a coherent position. In the speech he just made he said that they do not want to have their negotiating position constrained. The Government have themselves produced a number of red lines that constrain their negotiating position. Parliament must be allowed to constrain their negotiating position in other ways. Every day in Committee and on almost every subject we discover more issues that are important to Britain’s prosperity and security on which the Government remain confused and unclear about what their preferences are.

The Prime Minister’s speech the other week was a major step forward. She moved to recognise that we need to maintain in a number of areas that she specified—but only a few—close relations with the European Union. The Luxembourg Prime Minister’s comment on her speech was entirely appropriate: the United Kingdom now intends to move from a position where it is inside the EU with a number of opt-outs to one in which it is outside the EU with a large number of opt-ins. Parliament would wish to have a view on that. What we heard in the first debate this morning was: how many of these opt-ins do the Government wish to have? They must have a view on that and they ought to share it with Parliament. They need to share it with their European Union partners. It is not a negotiating position on which we wish to maintain flexibility.

Given all of that, it is all the more important for Parliament to have a meaningful and coherent vote on a package—or the absence of one—well before the prescribed exit date is reached. That is what Amendment 150 and the others in this group talk about, in one way or another. The Government seem to be more concerned about negotiations within the Conservative Party than with the long-term national interest of the country. We parliamentarians, in both Houses, therefore have to be the guardians of the national interest, and that requires substantial changes to Clause 9.

European Union (Withdrawal) Bill

Baroness Hayter of Kentish Town Excerpts

Wednesday 14th March 2018 Lords Chamber

[Lord Callanan]

Of course, I would be delighted to do so.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, we have to thank the Minister for his wisdom, his humour, his tolerance—but. One thing with which I agree with the Minister, on which I think I heard him right, is that he appreciates, which I have certainly felt, that there is clear support in Committee for a meaningful vote on the withdrawal deal, or indeed, on no deal. I do not know whether that will be the scorched earth, referred to by the noble Lord, Lord Lisvane, or the absence of a package, suggested by the noble Lord, Lord Wallace, but I think we know what we mean by “no deal”.

The question is: what is meaningful? If it is, as I said earlier, a mere Motion, with no statutory force, that surely is not meaningful. But it is not meaningful if it is not timely; in other words, if we do not have it early enough for it to make a difference. I think the noble Lord, Lord Wigley, asked whether it would be a case of like it or lump it. If so, I do not think that would work in either House. Indeed, I was quite concerned at one point when the Minister seemed to say that, if Parliament voted no to the deal, then we would come out without a deal. That is not what some of the amendments in this group want, and we do not want the outcome that if we vote down what there is, we will get the worst of all worlds. We want to put power back into the Commons, so if the decision is that the withdrawal deal will not do, it would be for the Commons to decide what to do about that. Also, the vote needs to be meaningful in that it should influence the choices that the Government will be making, as my noble and learned friend Lord Falconer said. That is the point. Knowing they have to come here for a deal will affect what happens in the negotiations, so the outcome will be influenced by a vote here.

It is absolutely clear from what everyone has said that it is for Parliament to endorse, or otherwise, the outcome, which is why I am not tempted by my noble friend Lord Adonis’s desire for a referendum. I remind him that it was a referendum that got us into this mess in the first place, but that is not the reason. The reason is that, like other speakers, I want to reassert parliamentary sovereignty. That is why we will try to bring back an amendment on Report that will ensure that, if Parliament gives the thumbs-down to the deal, it would be the Commons and not the Government that decides what happens next.

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[Baroness McIntosh of Pickering]

My Lords, I am grateful to the noble Baroness. If she is minded to bring forward such a composite amendment, if we have established that the CRaG rules apply—this is clearly an international treaty that we are discussing—would she add that the meaningful vote in Parliament should be before votes in the national parliaments as well? That is missing from the current drafts.

[Baroness Hayter of Kentish Town]

My understanding is that this will not go to them. We are talking about the withdrawal deal, which will be a deal between the UK Government and the European Union. It is not a mixed agreement; it will not need to go to the parliaments and it is not a treaty. That is what all the legal advice I have had says, but I am happy to be put right. This will not go through that process. We are dealing with two things. The first is how we come out, which is the withdrawal deal. The second, quite separate thing is what will then be our relationship as a third party with the European Union, which will be the treaty. That is what will need to go through the parliaments—sadly not the Welsh Parliament, but there you are. I had understood that this is what CRaG would cover; I had not heard that quote until now.

This amendment focuses on the withdrawal deal, and it is this that should—indeed, must—be taken through Parliament in advance of the European Parliament and, even more importantly, in advance of where the Government finally get to, so that if it has gone the wrong way, we have the chance to put it right. That is what I hope we will be able to bring back on Report, but in the meantime I beg leave to withdraw the amendment.

Amendment 150 withdrawn.

European Union (Withdrawal) Bill

Baroness Hayter of Kentish Town Excerpts

Committee: 6th sitting (Hansard): House of Lords
Monday 12th March 2018 Lords Chamber

Moved by

[Baroness Hayter of Kentish Town]

86: Clause 7, page 6, line 15, at end insert “fees or charges,”

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I shall speak sparingly to this amendment and others in this group given the expertise and experience of those others whose names are on them. Of course, it is traditionally not for this House to decide anything on the raising of taxes, but we have a role in considering the powers to raise fees or charges. This is the nub.

Without having spelled out why they consider that such powers need to be created and to whom they might be given, Ministers have decided that they should by mere secondary legislation be able to levy funds from—we assume—business and individuals. I shall leave it to those whose names are on the amendments to spell out rather more than I will their disquiet over such powers. I will then listen with great interest to what excuses the Minister is able to dream up to explain this particularly extraordinary Henry VIII power. I beg to move.

[Lord Turnbull (CB)]

My Lords, I regret that I was unable to attend all of Wednesday’s Committee stage, thereby missing a number of important speeches, but I have the opportunity now to speak on behalf of the noble Lord, Lord O’Donnell. I hope that your Lordships will accept that one Treasury ex-Permanent Secretary is a fair swap for another.

I particularly admired the speech of my immediate predecessor, the noble Lord, Lord Wilson of Dinton, who set out the proliferation of players and organisations who could have the right to make secondary legislation out of this Bill and the low hurdle they have to get over. These amendments raise important issues on the scope of secondary legislation, some of which has important constitutional implications.

The report of the Delegated Powers and Regulatory Reform Committee has pointed out that it is a long-standing principle—of some 330 years—that the introduction of taxation or its increase should not be permitted simply by secondary legislation. Amendments to Clauses 7, 8 and 9 rightly insist that levying of taxes and increasing them should not be covered by these powers. They also point out that some fees and charges are equivalent to taxation and should be subject to the same constraints.

One can break down taxes, fees and charges into different categories. There are those that simply cover the costs incurred in administering a particular service—for example, passports. One can test this principle by looking at the annual trading account that an organisation produces to ensure that no surplus is generated. Secondary legislation may be appropriate for fees or charges which satisfy this condition.

--- Later in debate ---

[Lord Callanan]

The noble Lord makes a good point. I was speaking to my noble friend Lady Goldie about the matter when he asked her the question earlier. I will have a look at this for him. I think it is fair to say that most of our negotiating positions on the existing directives and regulations are already public. We share our positions, the issues that are being discussed are transparently available on both our website and the EU’s website, and many of the issues that will come to fruition over the next year or two are already in early formative phases. I therefore genuinely do not think that there is much about this process that is secretive, but I will certainly have a look at the issue for the noble Lord.

[Baroness Hayter of Kentish Town]

My Lords, I think it will be obvious why I spoke so briefly at the beginning of this debate, as I have now heard far better speeches on this group than I would ever have made. I am sorry that the noble Lord, Lord O’Donnell, who “salivated”—his word at Second Reading—at the thought of being able to raise money by SIs, was not here. However, he and the other “guilty men”, as they were called, who used these in the past, have made the case well that this would be quite a move from our traditional way of raising money. Whatever the name of the charge—the noble Lord, Lord Deben, said that it was basically “taking money out of your pocket”, and the noble Lord, Lord Cormack, called it an “obligation to pay”—we know what we are looking at.

The noble Lord, Lord Deben, said that this had, “not been entirely well thought through”. I hope that that, rather than anything more untoward, is why this power has crept in there. As everyone has said, it is for Parliament to decide whether to raise funds—whether to pay for some WTO obligation or for anything else. The example of the American situation is very valid: it is how, ultimately, you stop Governments doing what you do not want them to do.

Earlier in this debate the noble Lord, Lord Lisvane, said that we need some hard examples. I do not think that the WTO example is the hard example to justify these powers. I think that his second point was that, if we do not get those hard examples to convince the House, surely it is much better that we leave this to the withdrawal (No. 2) Bill, by which stage we will know exactly what in the withdrawal agreement had led to the need to raise a particular fee, charge, imposition or whatever. That seems more appropriate.

Speaking about the WTO, I think that the Minister said that he thought the Government might be in a difficult position. I have to advise him that I think the Government are in a difficult position now on this power in the Bill. I hope that the Government will bring forward their own amendment on Report. That would be a way of taking matters forward. I am sure that there are far more expert noble Lords in the House than me who might meet the Minister to see whether we can find some such amendment. I hope that we do not have to repeat this debate on Report and that the Minister will bring something back because, if he does not, I can assure him that we will. For the moment, I beg leave to withdraw the amendment.

Amendment 86 withdrawn.

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[Baroness Bowles of Berkhamsted (LD)]

My Lords, I am sorry that there are too many speakers from this part of the Chamber, but I should like to point out that, although some advances have been made in the Sanctions and Anti-Money Laundering Bill with regard to the proposals that have already been mentioned, that is in the context of a particular Bill that has already received some scrutiny—and indeed some policy amendments—which make the application of criminal offences a little more palatable. There is, for example, the stipulation in the anti-money laundering part, which is the bit that has two years and is more akin to the instance envisaged within the withdrawal Bill, that there has to be a mental element. I do not see that safety here.

I further wonder why things that were not previously subject to criminal sanctions have to be made into criminal offences. It is a big policy change to say that any administrative or other misdemeanour is henceforth going to be criminalised with a two-year prison sentence. I do not call that “no change”. It has to be looked at in the context of each individual offence and how it may arise, otherwise you are saying that any regulatory breach will henceforth carry two years in prison. Moreover, you do not know the detail of what those regulatory breaches may be—how big or how small, or who may be on the other side of them. This would cover every piece of single market legislation. Some of these things will be quite small, and were not criminal offences before. What has changed through Brexit that suddenly we have to criminalise everybody for everything?

[Baroness Hayter of Kentish Town]

My Lords, because the case was made so clearly by the noble and learned Lord, Lord Judge, with the added detail provided by the noble Lord, Lord Marks, I shall not try to add anything to the substance of the argument. I just want to express my regret at the lack of preparation and forethought that went into the drafting of this power. Indeed, I was alarmed by it on the very day I first read the Bill and started blogging about it back in the summer. I then tabled Questions for Written Answer in October asking the Government what other instances there were of new criminal offences being created by secondary legislation. In the replies I received on 2 and 23 October, the noble and learned Lord, Lord Keen of Elie, was unable to list any.

I went on to ask the then Minister, the noble Baroness, Lady Anelay, the same question. The noble Lord, Lord Callanan, had by then taken over and replied in her stead on 14 November—but again gave no examples. The letter merely noted that “existing” criminal offences “in our law”—those are his words—which relate to the EU might need to be transferred to another body: for example, an offence not to notify an EU institution of something important relating to health. The letter ended by saying that the offence might have to be changed to a failure to notify the equivalent UK body. I understand that, but that is an existing offence, not a new one, and alters only to whom the report should be made. No case was made for, and no example given of, where new offences might be needed as we leave the European Union—much less one with the threat of up to two years in prison on first offence.

Noble Lords will not be surprised that I did not let this drop. I raised the issue again with the lucky noble Lord, Lord Callanan, who had another meeting with me in January—he has all the fun. On Wednesday last, when we anticipated dealing with this group, just before we broke for lunch I received an email from his department in response to my request in January. But again the email failed to answer why any new offences might be needed. It commented only that,

“existing criminal offences may require widening or amending, or new offences may need to be created to fix deficiencies in retained EU law”—

but provided absolutely no examples. The only example given in the email was of an existing offence where a business fails,

“to provide an EU authority with certain information”,

and therefore such an offence may,

“need amending to ensure they continue to operate effectively post exit day, for example by changing references from an EU authority to a UK one”,

and to ensure that businesses are complying with the law. Again, that is a change rather than a new offence. It is true that the email goes on to state:

“Previous case law”—


here I shall look to others to look into the detail of this—

“has created some uncertainty as to whether actions such as these would amount to creating a new offence rather than amending an existing one, and there could be differing legal views on this point”.

As I read the email, it seems that on that basis alone—that there is possibly a legal issue as to whether an amendment to an offence is a new offence—the Government have written themselves powers to create brand new offences that are punishable by up to two years in prison. So I think we are agreed that that will not do and that these powers have to go. Moreover, they have to go more completely than the Government allowed for in the sanctions Bill because, as was said in the debate at the time, anything there would follow an international agreement to which we would be a party as a Government—so there would have been that earlier stage. But these powers will not be part of that, and therefore I hope that, when the Minister responds, he will say that these powers are going to be taken out of the Bill.

[Lord Callanan]

First, I thank the noble and learned Lord, Lord Judge, and my noble friend Lord Hailsham for bringing the matter of creating criminal offences under the powers in Clauses 7(1), 8 and 9 to the attention of the Committee through their Amendments 87, 128, 156, 339 and 340, which seek to amend the relevant provisions in the Bill. As I said, I understand that similar concerns were raised during the debates on the Sanctions and Anti-Money Laundering Bill, but that a mutually agreeable outcome has since been reached, with the Government bringing forward a requirement on Ministers to make additional statements alongside their statutory instruments. Of course, the offences envisaged under that Bill were different and carried considerably greater sentences. I hope that I can satisfy the concerns that noble Lords have expressed during this debate. However, the Government are still looking very closely at how the powers in the Bill are drawn and how they will be exercised—and, as I say, we are open to discussion on finding similar solutions in this Bill.

I shall start with the reassurance that the three main powers in the Bill are explicitly restricted from creating a “relevant criminal offence”, which is defined in the Bill as an offence for which an individual who has reached the age of 18, or in relation to Scotland or Northern Ireland the age of 21, is capable of being sentenced to imprisonment for a term of more than two years. A vital part in achieving continuity and consistency for businesses and individuals as we leave the EU is to ensure that criminal offences continue to operate effectively after exit. As such, the Clauses 7(1), 8 and 9 powers can create criminal offences punishable by imprisonment for two years or less. In applying this two-year limit, the Government have sought a balance between appropriately limiting the three main powers and providing a functioning statute book on exit day.

The amendments would see that no criminal offences—or no criminal offences punishable by any term of imprisonment at all—could be created under the three main powers in the Bill. However, it is important that these powers are able to create certain criminal offences, as I shall come on to explain. For example, criminal offences provide an essential function of ensuring compliance with regulatory regimes which provide crucial protections for businesses and individuals. Some of the regimes criminalise particular conduct relating to the EU and some offences may no longer operate as intended after exit day if they are not corrected, particularly where functions transfer to a UK authority. For example, it could be an offence for a business to fail to provide an EU authority with certain information, but after exit day the authority collecting that information might be a UK one instead. Continuity would seem to demand penalties remaining in place—

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[Lord Callanan]

I understand the noble Lord’s concern, which comes on to the same point made by the noble Baroness, Lady Hayter. I will come on to deal with what constitutes a new offence and what does not in a second.

Continuity would seem to demand penalties remaining in place for what would substantively be the same misconduct. Currently, certain types of financial services firms are regulated at an EU level. Depending on negotiation outcomes, we may need to bring such firms into the UK regulatory regime. Under these circumstances, we would want the UK regulators to be able to regulate such firms in a way consistent with their current regulatory framework, in line with their statutory objectives. Where appropriate, this may include bringing firms within the scope of existing criminal offences to which UK financial services firms are already subject.

To give another example, Her Majesty’s Treasury is considering amending the existing offence in Section 398 of the Financial Services and Markets Act 2000 of “knowingly or recklessly” giving a regulator,

“information which is false or misleading”.

This would make it an offence, as a consequence of transferring functions from the European Securities and Markets Authority, for third country central counterparties to mislead the Bank of England in connection with recognition applications. In direct response to the noble Baroness, Lady Hayter, and the noble Lord, Lord Beith, a view could be taken that this creates a new offence as it will be a new function for the Bank of England and extends this offence to central counterparties established in third countries to whom it did not apply before. Her Majesty’s Treasury is also considering making similar provision for the FCA—as a consequence of transferring functions from the European Securities and Markets Authority relating to trade repositories—and similar considerations apply. We therefore need the power in its current shape to provide certainty that we can make such statutory instruments.

As an alternative example, marketing authorisations for medicinal products are currently granted at both EU and UK level. Post exit—again, depending on negotiation outcomes—it is possible that the best way to provide continuity for businesses marketing medicines in the UK will be to convert EU marketing authorisations into UK ones. Under Regulation 95 of the Human Medicines Regulations 2012, it is currently an offence to provide false or misleading information in connection with applications for marketing authorisations as this information is key to assessing the safety, quality and efficacy of medicines. The offence is punishable with a fine or imprisonment for a term not exceeding two years. It is vital that, if we need to, we are able to amend the existing offence or create a comparable one. I think we can all agree that it remains important that false or misleading information is not supplied in connection with the process of converting EU marketing authorisations into new ones, and that the public’s health is protected.

Noble Lords will see from the examples that the intent here is largely to ensure that the same types of conduct carry criminal penalties as before, or that we can create criminal offences to deal with the post-exit world. Previous case law has, though, created some uncertainty as to whether widening an existing offence would amount to creating a new offence, and there could be differing legal views on this point.

[Baroness Hayter of Kentish Town]

The noble Lord just used a different word—“widening”—but I think his earlier example was making a notification to a different organisation. “Widening” suggests that the scope of what might be a crime would be extended. Is that what he meant?

[Lord Callanan]

No, that is not what I meant.

It is therefore vital that the Bill can provide for “creating” criminal offences to ensure that no offences that are needed fall away as we leave the EU, and that businesses and individuals continue to comply with the law.

Any statutory instruments made under Clauses 7(1), 8 and 9 which create or widen the scope of a criminal offence will automatically be subject to the affirmative procedure so that they will be subject to a debate and vote in this House and in the other place. The Government accept that this level of scrutiny is important here and, as I said at the beginning of my remarks, I hope we can consider further safeguards. Therefore, I hope that with those assurances I have demonstrated why we think this element of the power must remain part of the Bill and that noble Lords will feel able not to press their amendments.

European Union (Withdrawal) Bill

Baroness Hayter of Kentish Town Excerpts

Committee: 6th sitting (Hansard - continued): House of Lords
Monday 12th March 2018 Lords Chamber

[Lord Judge (CB)]

My Lords, if we reflect on the words used by my noble friend Lord Lisvane, it is really rather chilling. There will be power in a Minister to create laws by giving him or her a blank sheet of paper so that he or she can write out whatever he or she thinks is appropriate. It will be uncontrolled and unscrutinised.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I have little to add but I have tabled Amendments 350 and 351 in this group. I should like to mention the importance of ensuring parliamentary scrutiny, in particular of tertiary legislation which was mentioned by the noble Lord, Lord Lisvane. We will deal with that issue later in a different group. The issue he raises is covered in paragraph 15 of the report of the Delegated Powers Committee. There is to be no time limit on the ability to pass tertiary legislation.

As has been made clear both last Wednesday and today, in seeking to bring into UK law the provisions that are currently effected in the UK by virtue of the 1972 Act and our EU membership, the Government have simply slipped into a belief that they should take control of all of this and have drafted for themselves powers and possibilities that rightly belong in Parliament, not with the Executive. As has been said, these amendments are to ensure that use of the powers will be properly scrutinised, and that they will be used by Parliament, rather than Ministers. I hope that the Minister has heard this often and strongly enough to be able to indicate, even at this late hour of the night, that it should be the Government who bring forward amendments on this on Report, because the arguments have been so well made. We should expect them to take the next step.

[Lord Callanan]

My Lords, I know that concerns regarding the delegation of legislative power, particularly where that delegation permits sub-delegation or allows for tertiary legislation, are shared by many in the Committee. I know that this debate has been brief because the hour is late, but I am aware of the concerns. I say up front in response to the noble Baroness, Lady Hayter, that the Government understand these concerns. We have listened carefully to this debate and to other representations that we have received, so for Report we will look to see how we can provide additional reassurances and transparency around sub-delegation and additional scrutiny of any fees and charges made under Schedule 4.

I will go into this in a little more detail, if noble Lords will forgive me. I know that it is late, but these are serious amendments on an aspect of the Bill that is of legitimate concern, unlike some of the amendments we discussed earlier. I hope I can do something to put some concerns to rest. I shall first take a moment to clarify that, where a legislative function is being sub-delegated under Clause 7 or any of the other powers in the Bill, that power will also be constrained by the policy restrictions that apply to the delegating power. In the case of Clause 7(1), that includes all the restrictions in Clause 7(7).

Although, beyond Ministers, there are indeed a great number of public authorities in the UK, there are only a very small number to which it would be appropriate for Ministers to sub-delegate legislative functions as an appropriate correction for a deficiency in retained EU law. Again, these will all be subject to the affirmative procedure.

I also restate that any SI providing for legislative sub-delegation will be subject to the affirmative scrutiny procedure and will have to set out what conditions apply to the exercise of that power. Whether scrutinising the sub-delegation of any of the powers in this Bill, the creation of a new, specific and targeted legislative function, or the transfer of any legislative power from the EU, I would expect this House in particular to take a keen interest in these instruments and to have vigorous debates on the appropriateness of the conditions proposed for the exercise of the power before voting on the instrument.

While the Government are listening to the Committee’s concerns about the form that this sub-delegation will take, they believe that conferring powers on public authorities, including Ministers, to allow them to make provisions of a legislative character or other legislation can be an appropriate course of action, either to make corrections to retained EU law or to maintain a regime in the future. This is particularly true where there is a need for specialised, technical rules to be developed, introduced and maintained by a body that has the necessary dedicated resource and expertise.

I will give noble Lords an example. The EU binding technical standards—the detailed technical rules developed by EU regulators for financial services—demonstrate where it might be appropriate to sub-delegate the responsibility for correcting. These standards, which run to almost 10,000 pages, fill out the detail of how firms need to comply with requirements of policy set in higher legislation. The PRA and FCA have already been given the responsibility by Parliament of developing and making the domestic detailed rules needed to ensure that financial services firms are stable, well managed and meet the needs of consumers. These UK public bodies have played a leading role in the EU to develop these standards, so they already have the necessary resources and expertise to review and correct them to operate effectively in the UK from day one of exit.

--- Later in debate ---

[Lord Callanan]

Let me make some further progress and see whether it responds to the noble Baroness’s questions.

Some of the powers to make legislation that will be transferred under the powers in the Bill are integral parts of regimes currently managed at the EU level; for example, where the European Commission currently legislates to add to or remove active compounds from lists of biocidal products. Where sub-delegated or transferred legislative powers are crucial to the functioning of a regime, it would not be appropriate for those powers to be subject to a sunset. That would only postpone rather than remove the requirement in the limited time available before exit for either a regular flow of primary legislation to keep regimes up to date or a suite of primary legislation to design equivalent powers to those which the Government intend to transfer under this Bill.

Perhaps I may address the three elements of Amendments 350 and 351 tabled by the noble Baroness, Lady Hayter. First, I turn to the scrutiny of the exercise of the powers by Ministers of the Crown in Schedule 4. We have laid out in Schedule 7, which I know we will debate at length another day, provisions for the scrutiny of those powers. Our position is that the powers should indeed be subject to the affirmative procedure where Ministers are creating new fees and charges regimes, or where we seek to grant an authority the power to set its own fees and charges. It is the sort of framework being established in which this House rightly takes a great interest. All this is of course possible under Schedule 4 only in relation to new functions that we are transferring from the EU or setting up on exit under the powers in the Bill. We have not provided for the adjustment of these, or for existing fees or charges, to be subject to the affirmative procedure. In years to come, there will be many such adjustments as technology cuts costs and inflation raises them. This ebb and flow can make a real difference to businesses, but does not normally represent a matter requiring debate and division within this House.

Nevertheless, I accept the point made by the Delegated Powers and Regulatory Reform Committee that the raising of a fee not by 1% or 2% but by, let us say, 13,000% would be a substantial matter. I trust, however, in the expertise of the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments to draw this House’s attention to such matters. I remind noble Lords that the negative procedure for statutory instruments does not mean no scrutiny at all, nor does it prevent debate. Nevertheless, if I have not addressed sufficiently the noble Baroness’s concerns on this point, I would be more than happy to discuss further how we might do so. As I said at the start, we are looking closely at this issue and expect to come back to it on Report.

Secondly, these powers are vested also in the devolved Ministers—we do not have the noble Lord, Lord Wigley, with us to make his regular point about devolved matters. While the scrutiny of the powers is important and, as I have just set out, the Government have tried to ensure that the most important of the regulations made under them will be affirmative, it is not for this House to dictate scrutiny to the devolved legislatures. The Bill contains a starting base of procedures for the devolved exercise of powers. While the devolved Administrations are competent to change these following Royal Assent, discussions continue with them about any alterations they may think it appropriate to make in the Bill. It would also not be appropriate for us to require the devolved Ministers to seek our approval for their statutory instruments—I am sure the noble Baroness did not intend this to happen.

My third point regards the sub-delegation of the power to provide for fees and charges. It bears repeating that any instrument providing for this will have to be affirmative, can delegate this power only to a body being given a new function under this Bill, and will have to set out the conditions for the exercise of that power.

[Baroness Hayter of Kentish Town]

It sounds as though what the Minster is reading out dates from before today’s debate on fees and charges. I had hoped that, in light of that, this continued idea of setting these by secondary legislation had gone from his mind.

[Lord Callanan]

We said that we would return to this matter on Report, but we are now talking about the sub-delegation of those fees and charges.

Moving on to Amendment 352 in the name of my noble friend Lord Hailsham, I am in total agreement with the principle that the Government should not raise fees or charges from the public, whether businesses or individuals, without considering the impact on those who will pay or the impact on both the payers and the wider economy. I may be wrong but I doubt that many in this Committee, other than the noble Lord, Lord Macpherson, who is sadly not in his place and is of course intimately familiar with it, will have read Managing Public Money. This weighty tome is easily available online and serves as the sacred text of Her Majesty’s Treasury regarding many things, including the setting of new fees and charges. It sets out that charges on the public must be subject to the general practices on consultation and economic and financial analysis. Without this, the consent of Her Majesty’s Treasury to establishing a new fee or charge, required by paragraph 3 of Schedule 4 for all new fees or charges under the Bill, cannot be obtained.

I hope that this long explanation, for which I apologise at this late hour, and my other points have gone some way to reassuring noble Lords. I am happy to continue discussing these important issues, but in the meantime I hope noble Lords will not press their amendments today.

--- Later in debate ---

[Lord Hunt of Wirral (Con)]

My Lords, we are very grateful to my noble friend for raising a very important issue. I know that the hour is late but I declare my interests as a partner in the law firm DAC Beachcroft in the financial services industry and as chairman of the British Insurance Brokers’ Association, known as BIBA. In the light of those interests, it will come as no surprise to the Committee to know that I spend a great deal of time talking to insurers and brokers, and many of them share the anxieties that have prompted my noble friend and the noble Baroness to put forward this amendment.

I think that all those who have spoken have welcomed the speech made by the excellent Chancellor of the Exchequer, with his determination to ensure that financial services lie at the heart of any new free trade deal with the European Union post Brexit. However, as the noble Baroness has just pointed out, some of the larger insurers have already begun to make provision for Brexit by relocating elements of their activities out of the UK to ensure that they remain in the jurisdiction of the EU—although I am still finding a strong desire and commitment to continuing the remarkable success story of the insurance sector in the UK post Brexit.

I have no time at all but I urge the Minister to give us assurances that committed engagement and genuine consultation with those affected will take place in a timely, orderly and constructive fashion. Insurers and their customers will be looking for reassurances that their legitimate interests will be protected during any changes in policy that are made or even considered during the transposition process. Obviously there is much more to say, particularly about the role of regulators, as my noble friend Lord Trenchard mentioned, but these are very important issues and I hope that the Minister will respond in a very positive way.

[Baroness Hayter of Kentish Town]

My Lords, I do not think that anyone who has read the excellent December 2016 report Brexit: Financial Services from our EU Committee chaired by the noble Baroness, Lady Falkner, will be under any illusion about the challenge that Brexit poses to this economically crucial sector of our economy. This evening we have heard of the needs both of those in the financial sector and of those who depend on it, and we have heard of one possible way forward, but the most important point is that something is needed urgently.

The British Insurance Brokers’ Association, to which we have just heard reference, the Alternative Investment Management Association, the ABI and TheCityUK have all come to me, and I am sure to other Members of this House, to raise their concerns about Brexit and particularly the wider implications for the legal sector and the insolvency sector and what that means for investors as well as for the more traditional City firms. Along the lines outlined by the noble Lord, Lord Carrington, TheCityUK has called for a bespoke market access agreement based on mutual recognition, regulatory supervision and co-operation, with, as we have heard, particular emphasis on mutual recognition and the enforcement of judgments.

In long-term contracts, legal continuity and certainty are vital for business, as we have heard, but also for consumers, as the ABI has stressed. Retired British citizens in nice warm areas such as the south of Spain need to know whether their annuities and pensions from London-based providers will continue after March next year, and indeed after December 2020.

The AIMA wants to see regulatory frameworks that enable managers to deal with any type of fund vehicle or account, as they now do, as they manage the savings and investments of pension funds and insurance companies. The British Insurance Brokers’ Association—100,000 people are employed in that industry, and they arrange 70% of all general insurance—says that it is “critical” to reach a transition agreement quickly and, following that, a mutual free-trade agreement.

The one word that I want to leave the Minister with is “urgency”, because insurance renewals are already being issued for annual policies renewable on 30 March next year, a date that I know is uppermost in his mind. Any policies running after 30 March next year would result in uncertainty over the legitimacy of that part of the policy that is effective after we leave. So we need these brokers to be able to ensure that there are no interruptions in customers’ cover, and that extends to whether we can be insured when we travel and when we drive our cars abroad, and to travel insurance if the EHIC ends—these are real things that people rely on day by day.

As we know, the UK is the world’s largest exporter of financial services to the EU, which is where I have to disagree with the noble Viscount, Lord Trenchard. He thinks that there is great hope somewhere else, but actually, for us to earn money in the EU and maintain all the customers we serve there, we must first prioritise establishing that we can continue with what we do so well there. Shoring up that business certainty through a formal agreement on regulatory equivalence or something similar is becoming ever more urgent.

We first started debating this report in the House in December 2016. We are now in March 2018, and I fear we are no clearer in knowing what the Government are doing. I hope that at this late hour, not just of the clock but of the calendar in moving towards when we leave, the Government will be able to provide a little more assurance than they have done thus far.

[Lord Callanan]

My Lords, I first thank my noble friend Lord Carrington for his amendment, which has enabled us to have this excellent short discussion. I also thank the noble Baroness, Lady Falkner, for her contribution. Of course, I know the report of her committee extremely well, as I was a member of the committee when it was produced and I participated in many of the discussions to which she referred, and which she very ably chaired. I thank my noble friend Lord Trenchard for his comments. He made some excellent points and pointed out the global nature of many of the financial services regulations that we are talking about.

The noble Lord, Lord Hunt, made some good points about the insurance industry. I can assure him that we will continue the work that we are doing in consultation and discussions with the industry as we take the negotiations forward.

However, although I thanked the noble Lord, Lord Carrington, for his amendment, I am afraid that we cannot accept it for reasons that I will explain. It would not be practical given that the negotiations on the UK’s future relationship and the eventual arrangements for market access in financial services post Brexit have yet to begin. It will be important that in entering negotiations the UK retains a degree of flexibility as to what the precise arrangements for market access for financial services firms may be. It is imperative that both sides come to the negotiating table with a constructive mind set. That was the essence of the Chancellor’s contribution last week. Agreeing now to set out a report according to the specific and detailed criteria set out in the proposed new clause would prejudge a great deal of the substance that has yet to be discussed by both ourselves and the EU.

I emphasise that the Government share the aims of the noble Lord’s amendment. We are seeking an ambitious relationship that takes account of the fact that the UK and the EU start from a position of total alignment, with unprecedented experience in working with one another’s regulators and institutions. As the Chancellor outlined last week, the UK is a global financial services hub—an engine that powers the real economy and the UK—and it is a real asset for Europe too.

In his speech—this refers to the point made by the noble Baroness, Lady Kramer—the Chancellor set out three key elements for a possible approach to a future partnership: a binding dialogue for establishing regulatory requirements for cross-border trade; supervisory co-operation arrangements that are reciprocal, reliable and prioritise financial stability; and an independent arbitration mechanism that has the confidence of both parties to provide durable dispute resolution. We hope that we would agree that the UK cannot be a rule taker in financial services but, by working together as the Government have proposed, the UK and the EU can preserve market access and strengthen stability and prosperity in the UK as well as the rest of Europe.

Underpinning this is our commitment to upholding the robust standards which are, as the noble Viscount, Lord Trenchard, pointed out, often based on international standards that we have developed since the financial crisis. These aims have consistently been emphasised in government messaging—more recently by the Secretary of State for Exiting the European Union and by the Chancellor. These align with what we have been hearing from the financial services sector in terms of a desirable end state deal. However, the details have to be worked through via the negotiations and the process will require imagination on both sides. This proposed new clause would set out a prescriptive template for the Government to follow. Negotiations are by their nature fluid and we cannot agree to provide a report based on a set of potential end state arrangements, which are predefined and outlined specifically here, that prejudges the outcome of negotiations before those talks have even started.

These issues are extremely important and I hope that the Government’s conduct in negotiations, as well as the clear public stance of Ministers on the significance of financial services to our future relationship, will help to provide reassurance over our commitment to securing agreement on these issues. Once the negotiations conclude, the Government will need to make clear the substance of what has been agreed. This is particularly so in order to enable the industry to understand the provisions for market access and how they sit within the UK’s agreed relationship with the EU on financial services going forward. We will of course, as always, be happy to update Parliament when the appropriate time comes. However, in light of the need to preserve UK flexibility in the negotiations, I hope that the noble Lord will feel able to withdraw his amendment.